Klarna, the buy-now-pay-later fintech, has raised US$800mln but had to accept a steep drop in its valuation to get it.
The financing round saw Klarna's valuation slashed by 85%, reflecting gloomy investor sentiment surrounding high-growth tech stocks and increased regulation of buy-now-pay-later lenders.
The Swedish fintech firm said it raised money from investors at a US$6.7bn valuation, down sharply from the US$45.6bn value it landed in a 2021 cash injection led by Japan's SoftBank.
Klarna’s valuation drop is expected to wipe 15% from listed unicorn investment fund Chrysalis Investments’ net asset value.
Market observers said Klarna was seeking a 'down round' - in which a privately-valued company raises capital at a lower valuation than when it last sold shares to investors - though Klarna chief executive Sebastian Siemiatkowski termed the deal a "testament to the strength of Klarna’s business".
He said the funding would be used to continue expanding in the US, where it now has over 30mln US users and with volumes having more than tripled year on year.
Michael Moritz, a partner at existing backer Sequoia said in the statement: "The shift in Klarna’s valuation is entirely due to investors suddenly voting in the opposite manner to the way they voted for the past few years.
"The irony is that Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010. Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve."
The round also included investment from Canada Pension Plan Investment Board, Abu Dhabi's Mubadala Investment Company, in addition to existing investors Sequoia, Silver Lake and Commonwealth Bank of Australia (ASX:CBA).
The fear of a nearing recession has led to a decline in valuations for a number of venture capital-backed tech firms who have made a series of layoffs and cost-cutting measures to appease skittish investors.
In May, Klarna itself reduced its global workforce by about 10%.
The new round of funding also indicates trouble for the 'buy now, pay later' (BNPL) market, for in an era of rising inflation and higher interest rates, businesses offering monthly installment payment plans such as Klarna and Affirm have faced questions about the sustainability of their business models.
Apple Inc (NASDAQ:AAPL) recently entered the BNPL market in the US.